IMF Solacing Global Economic Fallouts

of Coronavirus

Prepared by: Shehrzad (R&D Department)

Rawalpindi Chamber of Commerce and Industry (RCCI)

5/4/2020

IMF Solacing Global Economic Fallouts of Coronavirus

World is now on the verge of facing another global crisis which will be worse than the great

depression of 1930s’ and financial crisis of 2008, as warned by IMF chief

Kristalina Georgieva. With more than 3.5 million positive cases and 247,752

deaths across 187 countries1, IMF has decided to use its $1 trillion lending

capacity along with employing a swift first line of defense, where Fund will

deploy its rapid disbursing and flexible emergency response toolkit to help the countries struggling

with devastating economic blow from coronavirus.

IMF at a glance:

The International Monetary Fund (IMF) is able to lend $1trillion to its member countries by

acquiring money through 3 different sources. To finance lending, it normally uses quota as a first

priority which is followed by multilateral borrowing arrangements. IMF usually move to this

second line of

defense during hard

times, previously

invoke of financial

crisis. Lastly in case

of tail risks, IMF

supplements quotas

and new agreement borrowings by accessing bilateral borrowing agreements.

Economic Fallout

With a global loss ranging from $77bn to $347bn, the economic impact of coronavirus is already

visible in the countries most affected by the outbreak. For example, in China, manufacturing and

service sector activity has dramatically declined since the outbreak. While Italy is facing a

recession with expected GDP fall of 6.5% at the end of 2020, along Germany’s economic

1 John Hopkins University: Coronavirus Resource Center, Last updated:5/4/2020, 3:32:26 PM.

First line of

defence: Quotas

Second line of defence:

Multilateral Borrowing

Arrangements

Third line of defence:

Bilateral Borrowing

Agreements

$440

billion

(SDR 320

billion)

$344

billion

(SDR 250

billion)

$196 billion

(SDR 143

billion)

slowdown. The spillovers of pandemic are worse for developing nations. ADB2 suggests a $42,243

million loss under worst case scenario along with a loss of $19 billion to $45 billion in tourism

receipts for the rest of developing Asia. However, the worst is yet to come, fueling the associated

social challenges that will affect masses of people around the world.

IMF packages to mitigate Economic Impacts of Coronavirus

The world is facing global health crisis, as coronavirus is devastating economies across the world.

Inevitably, this virus is disastrously impacting people by snatching off their jobs and lives. Since

it is part of the IMF’s mandate to assist countries through policy advice and lending, it is now

working closely with world bank, ADB and WHO

to provide timely technical assistance and

financial support.

IMF: As lender of last resort As IMF is usually viewed as a lender of last resort

but being one of the first out of the gate with

policy action and tools, will go a long way to set

precedent as President Nicolas Maduro of

Venezuela and Irani president asks for $5bn dollar

emergency financing to fight the outbreak. Not

only this, over 80 countries seek aid and calls for

coordinated spending and almost every emerging

and developing country on the globe is now

looking up to IMF for relief funds.

IMF announced $50bn (£39bn) of emergency

funding for countries hit hard by the coronavirus

pandemic. Around $10bn of the total can be accessed by the poorest countries at zero interest for

up to 10 years and other $40bn at low interest rates for up to five years will be accessed by many

middle-income countries.

2 ADB briefs, no:128, The Economic Impact of the COVID-19 Outbreak on Developing Asia.

IMF help countries to mitigate

economic effects of pandemics

through

• Emergency Financing

• Catastrophe Containment and

Relief Trust

• Augmentation under existing

programs

• New Financing Arrangements

• Capacity development

IMF board approved the first emergency financing loan of $120.9 million disbursement for

Kyrgyzstan. Since the outbreak, it is the first loan approved by Fund, consisting of $80.6 million

loan under the Rapid Financing Instrument program and a $40.3 million loan under the Rapid

Credit Facility. Table 1 shows region wise grants disbursement by IMF under its different schemes.

Table:1: IMF country wise disbursement

Sr. Country

Amount

approved in

USD$ (SDR)

Type of

Emergency

Financing

Date of

Approval

Countries Receiving Emergency Financing and Debt Relief from IMF

Asia and Pacific

1. Maldives US$ 28.9 million

(SDR 21.2 million)

Rapid Credit

Facility (RCF) April 22, 2020

2. Samoa US$ 22.03 million

(SDR 16.2 million)

Rapid Credit

Facility (RCF) April 24, 2020

Europe

3. Albania US$ 190.5 million (SDR

139.3 million)

Rapid Financing

Instrument (RFI) April 10, 2020

4. Bosnia and Herzegovina US$ 361 million (SDR

265.2 million)

Rapid Financing

Instrument (RFI) April 20, 2020

5. Kosovo US$ 56.5 million (SDR

41.3 million)

Rapid Financing

Instrument (RFI) April 10, 2020

6. Moldova, Republic of

US$ 78.4 million (SDR

57.5 million)

US$ 156.7 million (SDR

115 million)

Rapid Credit

Facility (RCF)

Rapid Financing

Instrument (RFI)

April 17, 2020

7. Republic of North

Macedonia

US$ 176.53 million

(SDR 140.3 million)

Rapid Financing

Instrument (RFI) April 10, 2020

Middle East and Central Asia

8. Islamic Republic of

Afghanistan

US$ 220 million (SDR

161.9 million)

Rapid Credit

Facility (RCF) April 29, 2020

9. Kyrgyz Republic

US$ 80.6 million (SDR

59.2 million)

US$ 40.3 million (SDR

29.6 million)

Rapid Financing

Instrument (RFI)

Rapid Credit

Facility (RCF)

March 26, 2020

10. Georgia US$ 375.60 million

(SDR 273.6 million)

Augmentation of

Extended Fund

Facility

May 1, 2020

11. Islamic Republic of

Mauritania

US$ 130 million (SDR

95.68 million)

Rapid Credit

Facility (RCF) April 23, 2020

12. Pakistan US$ 1,386 million

(SDR 1,015.5 million)

Rapid Financing

Instrument (RFI) April 16, 2020

13. Tunisia US$ 745 million (SDR

545.2 million)

Rapid Financing

Instrument (RFI) April 10, 2020

Sub-Saharan Africa

14. Burkina Faso US$ 115.3 million

(SDR 84.28 million)

Rapid Credit

Facility (RCF) April 14, 2020

15. Cabo Verde US$ 32 million (SDR

23.7 million)

Rapid Credit

Facility (RCF) April 22, 2020

16. Central African

Republic

US$ 38 million (SDR

27.85 million)

Rapid Credit

Facility (RCF) April 20, 2020

17. Chad US$ 115.1 million

(SDR 84.12 million)

Rapid Credit

Facility (RCF) April 14, 2020

18. Union of the Comoros

US$ 4.05 million (SDR

2.97 million)

US$ 8.08 million (SDR

5.93 million)

Rapid Credit

Facility (RCF)

Rapid Financing

Instrument (RFI)

April 22, 2020

April 22, 2020

19. Democratic Republic

of the Congo

US$ 363.27 million

(SDR 266.5 million)

Rapid Credit

Facility (RCF) April 22, 2020

20. Côte d'Ivoire

US$ 295.4 million

(SDR 216.8 million)

US$ 590.8 million

(SDR 433.6 million)

Rapid Credit

Facility (RCF)

Rapid Financing

Instrument (RFI)

April 17, 2020

21.

The Federal

Democratic Republic

of Ethiopia

US$ 411 million (SDR

300.7 million)

Rapid Financing

Instrument (RFI) April 30, 2020

22. Gabon US$ 147 million (SDR

108 million)

Rapid Financing

Instrument (RFI) April 9, 2020

23. The Gambia US$ 21.3 million (SDR

15.55 million)

Rapid Credit

Facility (RCF) April 15, 2020

24. Ghana US$ 1,000 million

(SDR 738 million)

Rapid Credit

Facility (RCF) April 13, 2020

25. Republic of

Madagascar

US$ 165.99 million

(SDR 122.2 million)

Rapid Credit

Facility (RCF) April 3, 2020

26. Mali US$ 200 million (SDR

146.67 million)

Rapid Credit

Facility (RCF) April 30, 2020

27. Malawi US$ 91 million (SDR

66.44million)

Rapid Credit

Facility (RCF) May 1, 2020

28. Republic of

Mozambique

US$ 309 million (SDR

227.2 million)

Rapid Credit

Facility (RCF) April 24, 2020

29. Niger US$ 114.49 million

(SDR 83.66 million)

Rapid Credit

Facility (RCF) April 14, 2020

30. Nigeria US$ 3,400 million

(SDR 2,454.5 million)

Rapid Financing

Instrument (RFI) April 28, 2020

31. Rwanda US$ 109.4 million

(SDR 80.1 million)

Rapid Credit

Facility (RCF) April 2, 2020

32.

Democratic Republic

of São Tomé and

Príncipe

US$ 12.29 million

(SDR 9.03 million)

Rapid Credit

Facility (RCF) April 21, 2020

33. Senegal US$ 294.7 million

(SDR 215.73 million)

Rapid Financing

Instrument (RFI)

April 13, 2020

US$ 147.4 million

(SDR 107.87 million)

Rapid Credit

Facility (RCF)

34. Togo US$ 97.1 million (SDR

71.49 million)

Augmentation of

ECF April 3, 2020

Western Hemisphere

35. Bolivia US$ 327 million (SDR

240.1 million)

Rapid Financing

Instrument (RFI) April 17, 2020

36. Costa Rica US$ 508 million (SDR

369.4 million)

Rapid Financing

Instrument (RFI) April 29, 2020

37. Dominica US$ 14 million (SDR

10.28 million)

Rapid Credit

Facility (RCF) April 28, 2020

38. Dominican Republic US$ 650 million (SDR

477.4 million)

Rapid Financing

Instrument (RFI) April 29, 2020

39. Ecuador US$ 643 million (SDR

469.7 million)

Rapid Financing

Instrument (RFI) May 1, 2020

40. El Salvador US$ 389 million (SDR

287.2 million)

Rapid Financing

Instrument (RFI) April 14, 2020

41. Grenada US$ 22.4 million (SDR

16.4 million)

Rapid Credit

Facility (RCF) April 28, 2020

Moreover, IMF also canceled Congo’s debt-service payments to the fund for 6months, saving

the country about $20.4 million.

On April 13, 2020, IMF allocated USD$ 227.01 million for 25 countries under Debt Service

Relief from the Catastrophe Containment and Relief Trust (CCRT). The managing director of

IMF announced debt relief for 25 poor countries under IMF’s revamped CCRT as a part of

Fund’s response to help address the impact of COVID-19 pandemic.

Table:2: Debt Service Relief from the Catastrophe Containment and Relief Trust (CCRT)

Sr. Country Amount approved in USD$ (SDR)

1. Islamic Republic of Afghanistan US$ 3.28 million (SDR 2.40 million)

2. Benin US$ 10.17 million (SDR 7.43 million)

3. Burkina Faso US$ 11.96 million (SDR 8.74 million)

42. Haiti US$ 111.6 million

(SDR 81.9 million)

Rapid Credit

Facility (RCF) April 17, 2020

43. Panama US$ 515 million (SDR

376.8 million)

Rapid Financing

Instrument (RFI) April 15, 2020

44. Paraguay US$ 274 million (SDR

201.4 million)

Rapid Financing

Instrument (RFI) April 21, 2020

45. St. Lucia US$ 29.2 million (SDR

21.4 million)

Rapid Credit

Facility (RCF) April 28, 2020

4. Central African Republic US$ 4.05 million (SDR 2.96 million)

5. Comoros, Union of the US$ 1.33 million (SDR 0.97 million)

6. Congo, Democratic Republic of the US$ 20.32 million (SDR 14.85 million)

7. Ethiopia, The Federal Democratic

Republic of

US$ 12 million (SDR 8.56 million) (on April 30,

2020)

8. The Gambia US$ 2.87 million (SDR 2.10 million)

9. Guinea US$ 22.4 million (SDR 16.37 million)

10. Guinea-Bissau US$ 1.48 million (SDR 1.08 million)

11. Haiti US$ 5.61 million (SDR 4.10 million)

12. Liberia US$ 15.92 million (SDR 11.63 million)

13. Republic of Madagascar US$ 4.19 million (SDR 3.06 million)

14. Malawi US$ 9.85 million (SDR 7.20 million)

15. Mali US$ 9.99 million (SDR 7.30 million)

16. Republic of Mozambique US$ 14.9 million (SDR 10.89 million)

17. Nepal US$ 3.9 million (SDR 2.85 million)

18. Niger US$ 7.72 million (SDR 5.64 million)

19. Rwanda US$ 10.96 million (SDR 8.01 million)

20. São Tomé and Príncipe, Democratic

Republic of US$ 0.15 million (SDR 0.11 million)

21. Sierra Leone US$ 18.28 million (SDR 13.36 million)

22. Solomon Islands US$ 0.08 million (SDR 0.06 million)

23. Republic of Tajikistan US$ 10.72 million (SDR 7.83 million)

24. Togo US$ 5.12 million (SDR 3.74 million)

25. Republic of Yemen US$ 19.76 million (SDR 14.44 million)

IMF’s Disbursement to Pakistan

Pakistan already having the IMF’s $6 billion Extended Fund Facility loan program, requested an

emergency loan disbursement to fight coronavirus. The Executive Board of the International

Monetary Fund (IMF) approved a purchase of Pakistan under the Rapid Financing Instrument

(RFI) equivalent to SDR 1,015.5 million (US$ 1.386 billion, 50 percent of quota).

Under Fund’s Rapid Financing Instrument (RFI), government will address additional and urgent

balance of payments needs and support policies that would make it possible to direct funds swiftly

to Pakistan’s most affected sectors including social protection, daily wage earners and healthcare

system.

Pakistan will be able to borrow full

quota of about $2.76 billion over

two years, or $1.43 billion over a

single year to meet urgent balance-

of-payments needs. In addition to

this, World bank also provided $ 238

million and Asian development

bank (ADB) provided $350 million

to Pakistan in support for COVID-

19 emergency plan and to fight

socio-economic disruption

associated with pandemic.

Suspending debt

payments

Two-thirds of the world's poor

population lives in extreme poverty.

Out of which a huge proportion

resides in profoundly indebted poor

economies of Africa and Asia.

Recently David Malpass, World

Bank President highlighted that poor countries will take the hardest hit as they were already heavily

indebted before the crisis. Hence many regions will need debt relief as it is the only way they can

fight the outbreak by utilizing the resources they currently have. With the current pandemic, the

life standards will deteriorate coarsely. To provide relief, World Bank (WB) and the IMF called

on global creditors for suspension of loan payments from International Development

Association (IDA) borrowing countries that requested for such extensions to address their

immediate liquidity needs to battle the coronavirus pandemic. As of September 2019, Pakistan’s

ADB approved additional $2 million grant

for Pakistan

On March 30, 2020, the Asian Development Bank (ADB)

announced an initial package of approximately $6.5

billion to address the immediate needs of its developing

member countries in respond to the COVID-19

pandemic. Moreover, it approved further $2 million grant

to support the Government of Pakistan’s efforts to

combat COVID-19.

The grant, financed from the Asia Pacific Disaster

Response Fund, will help fund the immediate purchase of

• Emergency medical supplies

• Personal protective equipment

• Diagnostic and laboratory supplies

It supplements an initial $500,000 approved by ADB on

20 March, which is already being deployed to support

Pakistan’s procurement of emergency supplies through

UNICEF. Taken together, this $2.5 million in approved

funding represents ADB’s immediate response for

Pakistan, with further support to follow.

external debt was 106.9 USD bn and the numbers were rising consistently. Suspension of debt will

give an upper hand to the economy to tackle with coronavirus situation.

Moreover, World Bank is also working with 35 countries to address the ongoing pandemic by

redirecting the resources. WB has also planned to spend $160bn over the course of next 15 months.

IMF Policy recommendations amid COVID-19

The IMF also highlighted Vietnam and Thailand as examples of countries introducing new ways

of providing cash transfers. IMF also praised Philippines for using a public works program

employing informal workers as medical assistants amid virus outbreak. Malaysia was cited for

purveying grants to micro-enterprises.

Some of the ‘new deal’ measures proposed by the IMF include:

• Getting health basics right

• Tapping multilateral funding as a necessary measure making

• Clean water as priority

• Expanding safety nets

• Investing in digital economy to draw in more recipients of public aid

• Improving the business environment by reducing regulation and making the tax system

more efficient.

Limiting the Economic Fallout with Targeted Anti-Coronavirus

Fiscal Policies by IMF

In addition to the financial support and relief provided by IMF, it has also suggested some policy

measures to mitigate the impact of this pandemic. It stated that fiscal policy can play a great role

to alleviate the shocks with fiscal positions retrogressing to medium term paths uniform with

debt sustainability. Other measures include:

Spending to prevent, detect, control, treat, and contain the virus, aby providing basic services

to quarantined people. Moreover, national governments can allocate money for local

governments to spend on mobile clinics and medical personnel in affected places, as China and

Korea have done so far.

Conclusion

Due to globally imposed economic, humanitarian and social losses by coronavirus outbreak, it is

important to communicate to public that how emergency actions with changes to original budgets

are compatible with stability and sustainability of the economy. With the current financial support

and effective fiscal support measures by IMF, for the time being countries can limit the spread of

the disease and protect the people and firms most affected, by adopting operative policies.

• Targeted cash transfers to hard-hit sectors such as tourism.

• Paid sick leaves.

• Temporary support for individuals and households under strain.

o Wage subsidies to people and firms to help curb contagion by staying at home

o Expand and extend transfers

• Temporary tax relief through targeted reductions and delay in tax payment which can

help address cashflow shortfalls for businesses affected by pandemic.

• Easing monetary policy can also complement fiscal efforts, especially by keeping

inflation in single-digits in vast majority of countries in the region.

• Financial measures can help minimize disruptions to much-needed credit and liquidity

for businesses, including central bank liquidity provision or temporary credit guarantees.

• For countries with flexible exchange rate regimes, the exchange rate should be allowed

to act as a shock absorber.

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